Cyrus Mistry removed as director of TCS with 93.11% shareholders voting for his ouster

Mistry made an emotional appeal for a "conscience vote" in a speech read in absentia that included several scathing remarks aimed at Ratan Tata.Jochelle Mendonca&Megha Mandavia | ET Bureau | December 14, 2016, 09:55 IST

MUMBAI: Shareholders of Tata Consultancy Services expectedly backed the bid by Tata Sons to oust Cyrus Mistry as director of India’s biggest software developer following his removal as chairman of the firm last month.

About 93% of the votes at Tuesday’s extraordinary general meeting were in favour of Mistry’s removal while 7% were against it, TCS said in a release late at night. Among institutional shareholders, the vote was closer, with 44% abstaining. Of those who voted, 57.5% backed Mistry’s removal while 42.5% voted against it. As many as 82% of public shareholders did not vote. Of those who voted, 78% voted against Mistry’s ouster while 22% voted in favour of the resolution. Overall, about 87% of company shares were voted.

Minutes after TCS informed the National Stock Exchange about the results, Cyrus Mistry’s office issued a statement hailing the vote as "a big moral victory" for governance. "Almost 20% of shareholders of TCS that accounts for more than 70% of non-promoter shareholders supported Cyrus by voting against the resolution or abstained (expressing their disapproval of the promoter actions)," the statement said.

The EGM was not without its dramatic moments. Mistry made an emotional appeal for a "conscience vote" in a speech read in absentia that included several scathing remarks aimed at Ratan Tata, who listened impassively from the front row. At one point, a shareholder championing Mistry got into a shouting match with independent director Aman Mehta.

Out of about 40 shareholders who spoke at the meeting on Tuesday, only five questioned the move to eject Mistry from the board. Mehta said TCS independent directors had met separately and agreed unanimously that the removal of Mistry would be in the best interests of the company.

"When you have lost the support of the promoter, and when that trust has broken down, it goes beyond performance," Mehta said at the meeting.

Interim chairman Ishaat Hussain, who replaced Mistry as chairman of TCS last month, recused himself from the proceedings to avoid any appearance of impropriety. That theme — of doing things by the book — ran through all the proceedings on Tuesday at Mumbai’s YB Chavan auditorium. "We are taking these steps to be sure there is no unwarranted criticism," Hussain said. The meeting was chaired by Mehta instead and shareholders voted inside the hall, unlike the usual practice of placing the voting machines outside. This was the first time Ratan Tata attended a TCS meet in two years.

Mistry’s statement was read out by TCS Company Secretary Suprakash Mukhopadhyay. "Whatever be the decibel level of the voice that will drown your vote, I call on you to vote with your conscience and send a signal that catalyses a larger discussion on governance reform, to save the very fabric of what we have all inherited — the Tata Values that our founders handed us," Mistry said in the letter. "In the past several weeks, we have seen good governance being thrown to the wind in every sense of the term, replaced by whims, fancies and personal agenda. We have witnessed an unmatched erosion of ethical values and the very foundation of the institution being put to grave risk by the conduct of a few." Mistry said he was "fighting to save the soul of the Tata Group".

Of the five who wanted specific reasons for Mistry’s removal, one addressed himself directly to the interim chairman of Tata Sons.

"Does Ratan Tata want to be surrounded by yes men who agree with him when he says the sun rises at midnight? Mistry’s family owns nearly 20% of the Tata Group, and he was shown the door like this. It seems like any other professional would have been pushed out of the window," a shareholder said. Adil Polad Irani, a veteran of TCS annual general meetings, said: "Independent directors are not independent. Are they taking directions from Tata Sons and Tata Trusts? I don’t understand what you mean by Tata has lost confidence. (Mistry) is my chairman. What has he done that you have lost trust in him?"

It was when Irani took a second turn at the podium that the discussion between him and Mehta got a little heated. "You have gotten all the answers you are going to get," Mehta said.

The power struggle at the Tata Group broke out into the open when Mistry was sacked as chairman of the holding company Tata Sons on October 24 and replaced by Ratan Tata as interim chairman. Tata Sons has sought EGMs in group companies this month to oust Mistry from their boards.

TCS shareholders asked about a permanent chairman at Tata Sons. Ratan Tata has said he’s only staying on until a replacement is found.

"We need a Tata to run the Tata Group. Had Noel Tata been appointed as chairman of Tata Sons earlier this wouldn’t have happened. It was the biggest mistake," said shareholder Ronald Fernandes.

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